Leaseholder Enforcement: The Basics

Monday 23 October 2017

Of course, the starting point should always be warning letters and discussions with the leaseholder to ensure they are aware of the terms of their lease and the allegations of breach. Where this has not been possible or has not resulted in rectification of the breach, you should consider the following.

Injunction

If the leaseholder is engaged in anti-social behaviour, you can, as an RP, seek an injunction under Section 1 of the Anti-Social Behaviour Crime and Policing Act 2014 in the same way you would for a tenant. If the behaviour is serious enough, this could be obtained without notice and could include a power of arrest on relevant clauses (where there is violence, threats or risk of harm). In very serious cases an injunction could include exclusion from the home (temporarily). You will need witness evidence of the alleged anti-social behaviour, so the willingness of neighbours/victims to complain and allow their allegations to be used in court proceedings, even anonymously if necessary, is crucial.

If the leaseholder has breached other terms of the lease, such as condition of property, access or sub-letting, you can also seek an injunction under Part 8 of the Civil Procedure Rules to enforce the terms of the lease.

If the leaseholder breaches the Injunction Order itself, you could consider committal proceeding, which is more likely to be relevant in the case of an anti-social behaviour Injunction.

Liaise with the mortgage lender

When considering enforcement action, you should always check the terms of the lease to see if there is any particular obligation to liaise with any mortgage lender. Even if there is no such obligation, it is still good practice to do so. If you do not already know the mortgage lender’s details, you can obtain a copy of the Title from the Land Registry for £3 and the details will be in the Charges Register section. If the breach is regarding arrears of service charges or ground rent, many mortgage lenders will pay off this debt (before a Court Order) and add it to the mortgage.

Money Judgement

If the breach is regarding arrears of service charges or ground rent and there is no mortgage or the lender will not pay off the arrears, a creditor can issue a claim for a Money Judgment. There is a new Pre-Action Protocol that applies from 1 October 2017. You need to send a Letter Before Action giving the leaseholder 30 days to pay or respond. If the leaseholder responds, you have to wait a little longer before you can issue proceedings – you can find more details here. Once issued, if the leaseholder does not defend the proceedings, it can be very straightforward to obtain a default judgment. However, if defended, there is a chance the claim will be transferred to the First-tier Tribunal (Property Chamber) to determine whether the sums claimed are properly owed and reasonable.

Once you have a money judgment, if the debt remains unpaid you can take further enforcement action – the most obvious is to seek a Charging Order over the leasehold property and then, depending on the amount owed, the draconian step of an Order For Sale.

If the leaseholder is employed, you could also consider an Attachment of Earnings Order and/or if they have assets of value instruct a bailiff to seize goods. If you do not know enough about the finances of the leaseholder, you can also apply to the court to summons the leaseholder to attend and give details about his finances.

Forfeiture

You should only consider forfeiture as a last resort. It means the leaseholder will not only the lose his or her home but also their equity in the home. However, there will be occasions when this is the only option left to enforce the terms of the lease.

The terms of the lease themselves must allow for forfeiture, so this should always be your starting point. Additionally, you should bear in mind that you cannot forfeit a lease for sums of £350 or less or for sums that have been due for three years or less.

Above all, if you decide to pursue forfeiture, be aware of “waiver danger”! A landlord can waive the right to forfeit if they treat the lease as continuing after becoming aware of the breach. This means that any time after you become aware of the breach you want to rely on, you need to ensure you do not do things like:

accept any rent (you should return any bank transfer as soon as possible);

send any demand for rent;

increase the rent or service charge;

seek to enforce any terms regarding costs indemnity;

seek to enforce any repairing covenant.

You can, however, accept payment for rent that was due before the date of the breach.

For arrears of ground rent, you will need to check compliance with all relevant statutory requirements carefully (e.g. Section 47 Demand, Section 48 Notice of Address for Service, Section 166 Notice and the Pre-Action Protocol).

For arrears of service charges and breaches of other lease terms (e.g. condition of property, access, anti-social behaviour or sub-letting), firstly either the leaseholder must admit the breach or the landlord must have a final determination that the breach has occurred. This may well mean applying to the county court or the Tribunal. Then the landlord must serve a Section 146 Notice (“forfeiture”).

With residential premises, you will need a court order before you can re-enter. You can issue a possession claim using an N5 claim form and N119 Particulars of Claim. A leaseholder, or even a sub-tenant or mortgage lender, can apply for relief from forfeiture. A court will need to be satisfied that the breach has been rectified to grant relief.

Forfeiture is a very technical area of law and so if being considered, always seek legal advice.

Possession Proceedings

In the case of Shared Owners, the procedure to regain possession is different. As the Shared Ownership lease is an assured tenancy (as long as it began after 15 January 1989), you can bring possession proceedings using the grounds listed in Schedule 2 of the Housing Act 1988. The most commonly used grounds are Ground 8, 10 and 11 for rent arrears, Ground 12 for breach of the terms and conditions of tenancy, Ground 13 for condition of property and Ground 14 for anti-social behaviour. You must give 28 days’ notice to the lender before serving a Notice Seeking Possession, which you can then serve on the shared owner and lender. When the relevant notice period has expired, you can issue possession proceedings using an N5 claim form and N119 Particulars of Claim.

So there are many options available to landlords: the most appropriate one is going to depend on the circumstances, the outcome you want to/need to achieve and the costs involved, which will, of course, vary on a case-by-case basis.

In all the action to remove defective cladding, leaseholders have been the elephant in the room. Whilst social landlords might have adopted a wait and see approach private landlords do not have that luxury.